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tv   Real Money With Ali Velshi  Al Jazeera  February 28, 2014 7:00pm-7:31pm EST

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so much rain that people are preparing for floods. many have evacuated their homes because of fears of landslides. those are the headlines. i'm tony harris. "real money" is up next. david shuster is in for ali velshi tonight. >> a possible russian military intervention would be bad news for ukraine and unsettling to say the least for the global economy. we will explain. plus new data reveal that u.s. growth has been slowing down again. weather is a problem, and that was before the next winter storms coming this weekend. and the new hockey arena in detroit that developers believe could help save the city. i'm david shuster in for ali velshi. and this is "real money."
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>> this is "real money," and you are the most important part of the show. join our live conversation for the next half hour on twitter, real money. this has been another day of uncertainty in ukraine. a small country that plays a pivotal role to economic giants. the instability of ukraine and the di ployment of russian troops, in the crimea region of ukraine. one quarter of western's natural gas is supplied by iran, and half of that goes through ukraine pipeline network. any disruption would hit germany hard which depends on gas to run its factories. as it stands russian officials
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say they need $15 billion this spring to avoid a financial default and keep the country's economy going. in recent days an interim government in kiev asked the international monetary fund and other countries to help. many countries have investors who would be hit hard if ukraine goes under. even russia recognized the problem two weeks ago and pledged a $15 billion, but that was before viktor yanukovych was deposed. a russian intervention, or lingering tensions lead to go a debt default would cause havoc to trade, even here in the united states. for some contac contacts, in chy investors pulled their investments out of emerging markets and put them in bonds, gold and stable currency. in turn the u.s. stock market for a few weeks took a dive.
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instability in the ukraine could put us on that road again. because investors, including millions of americans who have 401ks, they do not like market volatility. when coupled with how it might hurt russia, that is a recipe for extreme volatility. we go to philip ittner in russ russia. russia has a lot invested in ukraine, what are russia's economic exposures? >> they are quite substantial. they are very close ties between ukraine and russia. not least of which their currency. the ruble it's believed that the severe deep that we're seeing in the ukrainian currency. there are other issues at play, not least the transit of natural gas resources, a vital pipeline
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that goes through ukraine, providing an awful lot of commerce for both countries as there are tariffs with that transit. so these two economies are deeply in betweened, not least of which also because in recent years russia had been trying to prop up the government of viktor yanukovych with a series of quite substantial loans. it's briefed that russia has $30 billion in outstanding loans to ukraine. so if ukraine defaults on those loans, and/or if those loans are put on hold because of the dispute that will have a severe reaction with the russian economy which is already having difficulty with the state of oil prices and other natural resources that russia relies upon. >> given the resources and what russia has invested with the
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loans and whatnot, is the view from moscow tonight this is as much an economic intervention as might be angiopolitical, in that russia is looking for stability in ukraine even if russia has to impose it? >> undoubtedly. i think russia is looking at ukraine in a number of different spheres. we're talking culturally, politically, and of course politically. vladimir putin has tried to create a free trade zone in what was the former soviet union. no one is calling it the re-establishment of soviet union. what vladimir putin puts it is the eurasiaen trading block that would include ukraine. if ththe ukraine pulls fromthatd
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they succeed without ukraine. we've seen it with the georgia economy. but ukraine is a big one. >> thanks. as we said president obama warned russia and it could spark economic fallout. simon mandale joins us here on the set. simon, first of all we talk about the economic effect on russia. what about the vulnerability of americans who have money in our stock market. >> i think the crisis has changed over the past several weeks. two weeks ago this was not an emerging market issue. this was an issue with the potential to spill over into other regions. now with the
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emergence of obama coming out saying there will be costs for any activity by the russians, it has become more of a geopolitical issue. in that sense it raises the stakes in both energy prices and other risks. we might see energy prices go up. a good chunk of europe's gas supply come from russia. and if that is at risk, they could be cut off. >> when we talk about emerging markets many include russia in places where you can invest and get a very high return. iin the risk of that country suffers, they may pull back from the united states. we're talking about crimea who are holding a referendum for greater autonomy. it's a greater impact.
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i don't think the impact will be that great. >> there is the ethical, moral issues involved whether or not they should help the ukraine. but as far as the economic connection, you think its simpler? >> i think if the intention thes flare-up between russia and u.s. and they're start to go, and they're pushed into a corner by the u.s. and aid by the european union, there could be an impact on the global energy crisis. >> let me ask you a question. we mentioned last month china with that bad economic report and then run on currency, people moved their money and it caused the stock market to dive. why not on monday global investors will see emerging markets are in trouble again and it's time to move money yet again, and that jittery for the markets. >> it's not an argument whether
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emerging markets are suffering in the world. that is the case. again, we don't see this as a buying opportunity for buying russian quickties. this has been a fundamental shift in power and regime for a country that has been yearning for it for over 0 years. in terms of a government that implements reforms this is quite important. we'll see what happens in the coming two months before the presidential election of may 25th. you know, it's a great opportunity for ukraine. >> especially if ukraine can put some sort of government together and pay back and avoid a default. simon, thanks for being on the program. >> thank you, david. >> the u.s. treasury department said the federal budget has fallen to the lowest in five
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years. america was running trillion dollar plus during the recession, but with the government started taking in more tax revenue and the deficit is the difference between what the government takes in and what it spends. many people confuse it with the debt which is what the government borrows to cover the deficit. an economic stock could be right around the corner. more on that coming up. and forget the fish that saved pittsburgh. we're going to tell you about the hockey arena that could save detroit. that and more as "real money" continues.
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>> the strength of the u.s. economy but the over all picture remains cloudy in part because
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of the weather. the biggest news was the revision to gross domestic product for the final three months of 2013. we'll learn more about that in a moment. but first, the contracts to buy homes edged up but less than economists expected, and is near a two-year low. as we reported the housing market has been hurt by this year's severe winter. we also learned that consumer sentiment rose slightly in february despite frigid temperatures and weak job growth in december and january. let's now talk about gdp. we learned that gdp slowed more than first thought after an impressive 4.1% gain in the third quarter. the revision to fourth quarter gdp raises new questions about the engines of economic growth: american consumers. >> from dismal job creations to sluggish sales the economy is
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not growing as robustly as many had hopped. today the government offered more proof, revising the growth number down sharply from 3.2% to 2.4. most of the change was due to consumers not spending as much as first thought. >> consumer spending in the fourth quarter really wasn't as good as we had hoped. there is a little bit of weakness remaining in the consumer. >> some blame the frigid temperatures in part for putting a chill on consumer spending late last year and into the first quarter. other factors include the loss of emergency unemployment benefits estimated to have shaved half a billion dollars from retail sales. and then in the third quarter last year manufacturers had a bumper crop of unsold merchandise like cars. and inventory overhang they weren't keen to add to as the year ended. >> the head winds are temporary. the inventory cycle, weather,
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these all prove temporary. in fact, the fundamentals for the u.s. economy really haven't changed that much. >> at least mother nature has not put a chill on consumer confidence. many people feel positive where the economy is heading, and that's a good sign that things could pick up as the weather improves. >> the weather has slowed down the economy. but many analysts forecast a sharp snap back in march. do you think this is all a matter of the weather getting warmer? >> i think this is a deep freeze problem and we'll see a significant bounce back. as we look at the gamut of economic data. employment, retail sales, buyer traffic in the retail market. all of this is depressed by the weather. if you were planning to buy a car in january and got snowed
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out, and chances are you got to february and march and then decided not to buy that vehicle. this weather could be creating pent-up demand and at some point we may get a great pay back. in the blizzard of 1996 we saw a big pick on non-farm payrolls, and then in th the following moh we got the pay back. the risk is probably not on next friday's implement report which is the february report because we know that february was still pretty bad. but in march or april watch out because we could have a great snap back. >> the difference being that we had a lot of government jobs that went away, and those government jobs are not coming back. that's a factor that may depress the economy. >> we had a big drag on the government sector. a lot of that drag' baits this year. some of those government jobs may not be coming back. if we look at the state and local level we see some evidence that those jobs are starting to
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come back. so it's really a mixed bag on the government side. if we look at the private economy things look better in 2014. the housing market is coming back. personal consumption and spending is coming back. and also business investment spend something rebound going one thing that is not rounding or coming back, and that is page wages. what about the argument that the economy is puttering along. it's not enough to help people at the higher end of the economy, but it's no helping ine economy. >> inflation was telling us what was happening in the economy maybe a year year and a half ago. a year year and a half ago things were not so good in the economy. as things improved you'll see the unemployment rate move forward as it has over the past couple of years. as we get close for a 6% or 5.5%
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unemployment rate i think we'll hit 6% by the end of this year you're going to see more wage pressures. we're starting to see leading indications of that shortages of skilled layer. those are precursors to eventually a broader rising tide of wage inflation, and that will help those people who right now feel left out of the labor market economy. >> should we expect it will get hurt again because of the major storm coming this weekend. california with a record ray that could cause mudslides. >> it's not just this weekend. it's been the case over the course of much of february. it was true in december. it was true in january. it was true in february. this is the weather of discontent without a doubt. but the good news spring will eventually get here. when it does arrive i think we'll see surprising improvement. >> i hope you're right, senior economist for deutsche bank.
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thank you for joining us. >> thank you. >> the small world of bitcoin got stranger this week. one of the biggest exchanges where bitcoin was declared bankruptcy. the tokyo company said they may have stolen bit coins worth $500,000. that's bad news for the man that you see in this photo. he and others have been unable to draw particles since the beginning of the month. the company's ceo apologized and said the overall entry is healthy and growing. plans to expand the $100 canal is back on track. the agreement ends a two-week work stoppage after saying they needed $1.6 million to continue the project. the expansion projected a cost of $5 billion. it will now be finished by december 2015.
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panama stands to bring in more than a billion dollars a year in total fees from and the expansion will help the united states to transport natural gas more easily to marks in asia. build it and they will come. that's how it works in the movie "field of dreams." and red wings, hockey opportune, intriguing strategy right here.
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>> lisa fletcher is here now with what you're going to see. the way we use the internet and access it could change, right? >> yes, along with what we pay for it. most have heard this phrase net neutrality, but very few know what it really means. we'll break it down to why you should care, the direct basket on you, your wallet and small towns and start ups. >> this really does effect us all. don't miss "the stream" right after "real money."
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>> 25 years ago at university of michigan i would leave class early and go to detroit. whether it was a baseball game o,it was considered a sports lor mecca. they want to make it that way again. the detroit city council gave the go ahead to build an entertainment district including a new hockey arena for the red wings. but the terms of the deal are creating controversy. it's being told for $1. he'll finance 4% of the project the other 58% will be financed by state funds.
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no city public funding will be used. a self made billionaire who founded little caesar's pizza. he owns the red wings and the tigers. he's credited with reviving them in recent years and feels he can do the same thing in downtown detroit. but not everyone agrees. is it a good idea for michigan to spend this money this way on detroit? >> i think it's a problematic investment at this point in time. let me also clarify that it's not entirely clear that it's state money rather than detroit money. it's coming from detroit development downtown development authority primarily. it's supposedly tax increment financing money. that almost never pays off the way its supposed to pay off.
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this is more likely a dream of municipal funds rather than on state funds. i do think it's clear there are many elements of this package including the prospective lease agreement that are still unclear. >> there have been many occasion where is spending this money does not help. the research has proven that. but it has also indicated that in some cities like indianapolis it can have a stimulative effect. indianapolis decided it wanted to be the sports mecca of the midwest, and it had an amazing impact on downtown indianapolis. >> yes, i think that the evidence on indianapolis is a little bit more ambiguous than you're suggesting. the places where investment in sport has been a pay off. and the real estate surrounding the stadium. the example of petco park in san
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diego, the example of atlantaing yards project in brooklyn. as the owner comes forward and says i'm going to personally raise and personally committee $1 billion to retail, residential and themed development around the ballpark, then it pays off. in this case you're talking about the promise of $200 million, and an arena of $400 million. it's not a lot of money for auxiliary development, and it's not at all clear give the situation in detroit whether the entertainment themes will come to fruition. >> well, they want to make it work as much as anybody. he knows the importance of having th it to benefit from.
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why not give him a chance? >> well look, mike has really been something of an angel for detroit sports. he has stuck with the city. he hasn't made threats about leaving detroit. he himself financed over 60% of the building of comerica park, and now he's willing to finance 4%. i guess its diceyer and more uncertain investment now than it was back in 2000 when comerica park was finished. the look, the problem is this. ballparks and energies by them dungeon rate development. all of the evidence that we have says the same thing. you can't count on it. sometimes if there is a project an if the lease is very concessionary sometimes a sports product. but you're talking about detroit right now.
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it's. bankruptcy and talked about cutting pensions of retired city works by 20%. there are better ways to involvement money. there are interesting projects being discussed in detroit right now. they're talking about building a larger and more successful commercial point. those are places for money to be put. if you talked to city works, that could spur economic activity. we still have to look at this project critically and see the details that have not been fourth coming. >> the profession of sports economics, thank you for joini joining. >> my pleasure. >> we asked you to look at the red wings arena, the tax payers are held. is this the way to build up a
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city. thit's good for the city. and then if i can't afford to go to any of the games how can i afford a frozen pond. the state of new jersey nearly ran out of road de-icing salt. it called the giant cargo ship sitting in the port waiting to sale south. but a law protect u.s. chipping industry under foreign competition. if you want to bring anything from one u.s. sport to another you have to build an american ship with an roll american flag. the only american-owned ship available to transport the salt
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was a small boom. new jersey is the only state to play. flights in hawai'i are 15% more expectsive without the law. roads like the new jersey turnpike are a big deal, and keeping them clear at the lowest cost protect other american jobs. congress, if you're living, the 94-year-old jones act needs a review. that's our show for today. on monday the story of a small businesses that are lining up for loans to sacrifice brutal winter weather. thank you for joining us.
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>> hi, i'm lisa fletcher, and you're in "the stream" . you pay for internet access. but are you getting your money's worth. is your net experience being controlled by big media? >> our producer a.m. waj i wajai bringing you live feedback to the show. you name t we're on it every single day. but there is a growing concern that the way with you use it and access to it could change. >> yes, this is